Evidence-based practice has gained much traction in the field of medicine. The British Medical Journal voted evidence-based medicine among the top 10 medical advances since 1840. It ranks amidst sanitation, antibiotics, vaccines, and medical imaging to give a sense of what kind of importance medics assign to it. Most recently, the evidence-based practice found its way into the asset management industry. Nonetheless, the concept is not widespread and predominately applied by some of the industry leaders. Among them is, for example, the Government Pension Fund of Norway, which is the largest sovereign wealth fund in the world.
Evidence-based investing describes the practical application of objective research performed and challenged by academic experts who have no conflict of interest regarding their results. The evidence-based approach brings research findings across asset classes to the investment decision process. Risk and return expectations are formed from robust statistical evidence.
The practical application of evidence-based portfolios does not have to be complicated. Efficient solutions exist, which are low-maintenance and straightforward.